Before the market opened on Aug. 5, Moderna Inc. (MRNA, Financial) reported its earnings results for the second quarter.
The Massachusetts-based biotech company reported revenue of $66.4 million for the three months ended June 30, which was significantly higher than the $13.1 million reported in the prior-year quarter due to funding from grants and collaborations. The loss per share came in at 31 cents compared to 41 cents a year ago. According to a poll from FactSet, analysts had been expecting revenue of $27.5 million and a loss per share of 35 cents.
Moderna’s stock lost approximately 4% throughout the day’s trading following the news.
Behind the numbers
Despite the encouraging earnings beat, it should come as no surprise that Moderna’s share price dropped following the earnings report. The company has yet to begin earning revenue from its pipeline of mRNA vaccines, all of which are still in research and development, so the price is still highly subject to investor sentiment.
Compared to the same period of 2019, Moderna received $18 million more in collaboration revenue and $34 million more in grant revenue, the two sources that make up its income. The majority of this funding was for its Covid-19 vaccine treatment, mRNA-1273, for which it began the Phase 3 study on July 27.
On paper, the company recorded a reduction in net cash used in operating activities, which totaled $130.1 million for the first half of 2020 compared to $252.9 million in the first half of 2019. However, it should be noted that this was mostly due to “an increase in deferred revenue attributable to deposits of $75.0 million received in the second quarter of 2020 for potential supply of mRNA-1273.”
As of the end of July, the company has received $400 million in customer deposits for potential supply of mRNA-1273, which it has already priced into its 2020 guidance.
CEO Stéphane Bancel had the following to say:
“The second quarter marked a new growth phase for Moderna as we started to build our commercial team… In the second quarter, we began discussions with several countries for supply agreements for mRNA-1273 and as of July 31, we have received approximately $400 million of customer deposits for potential supply. As we pivot to a commercial stage company, we recognize the need for responsible pricing in the face of the pandemic. We look forward to continuing our progress as we prepare for the Phase 3 readout and the expected subsequent filing of our BLA.”
Pipeline updates
The Phase 2 study of the Covid-19 vaccine candidate has been fully enrolled following the successful Phase 1 trial. The 100-microgram dose, given in two shots four weeks apart, is the one that will be advancing in the trials, though all 15 patients in the trial experienced side effects. The 250-migrogram dose was set aside due to severe side effects. Enrollment in the Phase 3 study of mRNA-1273, which will study 30,000 volunteers in the U.S., began on July 27 and is expected to be completed by the end of September.
From the earnings numbers, it is clear that Moderna’s Covid-19 vaccine and its success (or failure) will be what determines the share price for the foreseeable future, and this is something potential investors should keep in mind. Given the acceleration of the vaccine’s development due to the pandemic situation, it will be the first true test of whether Moderna’s mRNA platform is capable of producing an effective candidate.
However, the long-term value of the company will also depend on the rest of its pipeline. In total, Moderna has 23 mRNA candidates in development, with 13 in clinical studies. As of the quarter’s end, it has published more than 50 peer-reviewed papers.
Aside from the Covid-19 candidate, the only other candidate preparing for a Phase 3 trial is the cytomegalovirus (CMV) vaccine mRNA-1647.
Treatments that are in Phase 1 or Phase 2 clinical studies include cancer vaccines mRNA-4157 and mRNA-5671 or V941, which are being explored in collaboration with Merck & Co. (MRK).
Multiple clinical trials have been paused due to the ongoing pandemic, partly for the safety of the participants and partly to concentrate efforts on the Covid-19 vaccine candidate. For example, participants in the studies of developmental treatments to replace missing or defective proteins were identified as being at particularly high risk for Covid-19 complications, so the clinical studies of these treatments have been paused.
Guidance
Moderna has updated its guidance with positive expectations for the prospects of mRNA-1273. The company now estimates net cash used in operating activities and purchases of property and equipment to be between $650 million and $850 million.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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